1. Field of the Invention
The present invention relates generally to financial systems and services. More particularly, though not exclusively, the present invention relates to a system and methods for providing financial services to producers in the agricultural industry.
2. Problems in the Art
Providing financial management services to producers in the agricultural industry is not new. Crop and livestock producers have for years sought better ways to help maximize profitability. Uncertainty about the future is an inherent part of farming and often times affects profitability. Producers have therefore looked to business models and financial planning to help maintain a profitable operation. Unfortunately, the business models and the system presently available suffer from various deficiencies.
The purchase of crop insurance is often problematic for producers. Typically, a producer will purchase a level of crop insurance that leaves him either overinsured or underinsured. If a producer is underinsured, he is at a risk of not covering his expenses in the event of a poor yield or harvest. Whereas if the producer is overinsured, he is paying for insurance that he does not need, which negatively affects profitability. To date, producers have only been guided by past experience and rules of thumb in determining how much crop insurance to purchase at the beginning of each year. Thus, a need in the art exists for a new system and methods to help ensure that the crop producer has a guaranteed income as close to the break even point as possible.
Another problem in the art concerns the ability to accurately predict profits and losses for the producer. Many producers rely solely upon estimated future income and expenses as a measure of expected profitability. However, such a predictive model fails to count for actual expenses that are incurred and income that is realized during the year. For instance, a producer might estimate total future expenses at the beginning of each year to establish an annual break even point. If during the year actual expenses exceed the estimates, the break even point may tend higher unbeknownst to the producer. Without the benefit of this information, the producer is at greater risk of making poor business decisions based upon faulty assumptions regarding profitability. A need therefore also exists in the art for a financial consulting and management system that takes into account actual expenses and income in predicting future profitability.
Other problems in the art concern the use of sales contracts and, in particular, decisions regarding when to enter into contracts for the sale crops or livestock. Producers will often rely upon marketers for advice as to when to sell. In evaluating when to exercise a “put” or “call” or any type of hedge account, the marketer will not likely know the impact on profitability that such a transaction would have until it is complete. What is more, the marketers or producer tend to make assumptions on profitability based upon inaccurate forecasts of profits and losses that fail to account for the producer's current break even point. As a result, a producer will likely either sell too low to achieve his profitability goal or fail to capitalize upon a lucrative buying opportunity. A need therefore also exists for an improved marketing system and methods tied to the producer's current break even point that facilitates informed decision making.
To date, various business organizations have sought to provide crop insurance services for producers. Others have offered accounting and record keeping services. And still others have provided brokerage or marketing services for producers. Many of the aforementioned problems arise from the inability to link or integrate these services. As an example, knowing the producers' break even point may be useful in determining an appropriate level of crop insurance. That same break even point and related financial information is of value to marketers in advising producers on contemplated sales contracts. As previously explained, the break even point is likely to fluctuate throughout the growing season or year with unforeseen expenses. This is but one example of how these three financial services provided to producers—crop insurance services, accounting and record keeping services, and marketing services—are inter-related and rely upon much of the same financial information. Such an integrated system of financial services is not presently available, however. The need therefore exists for a new method of doing business wherein such services are integrated and provided by either a single source or affiliated firms.